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Landlord Tax Break Removed

A recent Residential Landlords Association (RLA) survey suggests that the removal of landlord tax breaks in the last budget will almost certainly lead to higher rents for private rental sector tenants.

Chancellor George Osborne included landlords in the Budget, limiting landlord tax relief on mortgage interest tax to the basic tax rate (currently 20%). This will be phased in from 2017. In a double blow, the landlord wear and tear tax allowance, which was previously set as an automatic 10% of the annual profit on a buy-to-let property, will now be calculated solely on a provable expenditure basis.

The findings from this Residential Landlords Association survey suggests that 65% of landlords are considering increasing rents on their investment properties as a direct result of the Budget tax changes.

These findings seem to undermine the HMRC assessment that these landlord tax changes will have no significant impact on private rental sector rent levels.

The RLA points out that Osborne has argued that landlords are taxed more favourably than owner-occupiers. The RLA have produced reports from the Institute for Fiscal Studies and the Policy Exchange, both of which warn that this is not correct.

Unlike owner-occupiers, landlords are taxed on both rental income and capital gains.

Alan Ward of the RLA said: “The reality is that the Chancellor’s belief that rental property is taxed more favourably than home owners is simply not correct. Rather than supporting the sector to provide the vital homes needed to support a flexible labour market, today’s Finance Bill will choke off supply and drive up rents.

“The belief that landlords should be compared to home owners is like comparing apples with pears. The two are vastly different. It’s time the Treasury recognised residential landlords as a business.”

Victor Jameson of Cambridge Letting Agents New View Residential commented: “While I can see how landlords with larger portfolios may make rent level decisions based upon this landlord tax change, I do not believe it will have a major impact on the majority of our Cambridge landlords, most of whom have just one or two buy-to-let properties.

“At the end of the day it is supply and demand that will set rent levels for any given area. Landlords do not usually have the luxury of just deciding how much rent they will charge. If there are comparable properties at a lower rent, then those are the properties that are likely to let first.”

Original Article: www.lettingagenttoday.co.uk

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